Defense and Offset agreements

In March 2009, the President of France, Nicolas Sarkozy, visited Mexico in what seemed to be the beginning of a new era of strategic partnership among the two nations.

During that visit, both Sarkozy and Mexico´s President Calderon signaled a series of cooperation agreements regarding security and defense issues. The French delegation and Mexican authorities agreed on the establishment of a High Level Contact Group, made up by diplomats and private companies with one common goal: to increase commerce and mutual investment between the two nations.

Although there were several agreements on police cooperation and intelligence gathering training, one accord was significantly relevant: Eurocopter, a franco-german helicopter company part of the EADS group, would install an assembly facility in Mexico worth 500 million Euros. The establishment of such a facility would boost Mexico´s increasing aeronautical development capabilities.

Yet the agreement itself wasn’t the most important aspect of the visit, but the industrial and technical cooperation (offset) that followed it. For instance, as compensation to the facility installation, the Mexican government agreed to buy a number of helicopters made by Eurocopter.

Days after the French delegation departed, the Mexican Air Force announced the purchase of six EC 725 multipurpose helicopters, worth 300 million dollars. The package also included training for Mexican military personnel along with surveillance and reconnaissance electronic equipment.

EC 725 Cougar (Picture: Eurocopter)

Although further details have been kept in secret, we’ve learned that more purchases will follow. It is likely that the Mexican government will acquire more Cougar helicopters and perhaps a number of AS565 Panthers, already in use by the Mexican Navy Off-shore Patrol Vessels.

This was the first major offset agreement regarding the Mexican defense sector of modern times, and should serve as an example for future military hardware acquisitions.

For instance, offset agreements not only supply high tech products to a given nation, but also provide access to technology and industrial development.

With an escalating role in internal security missions –and an ever-increasing budget- the Mexican military is eager to modernize a lot of its old hardware (say infantry mobility vehicles, C4 and intelligence systems, transport aircraft or patrol ships).

Therefore, private companies willing to sell new products to Mexico’s military should start thinking about technical and industrial cooperation as well, for business will not be as simple as it used to be.

5 thoughts on “Defense and Offset agreements”

Thank you for the invitation. I will make sure to stop by frequently, and add to discussions already in progress, or start a new one. As we all now, there is a war going on south of our borders, and it’s a very, very interesting topic.